Americas News
Oil Execs Urge OPEC to Extend Production Cuts Through 2018
Total, BP, and ENI on Friday expressed their support for the Organization of the Petroleum Exporting Countries (OPEC) to extend its production cutback agreement past the March 2018 deadline and through to the end of the year, due to what one of the oil majors called "huge volatility" in the energy market.
Patrick Pouyanne, chief executive of Total, said of the extension "Of course they need it," and added that "huge volatility in the market" had caused OPEC officials to focus more intently on stability and "visibility": "It is better to keep a stable policy, and I think the OPEC and non-OPEC agreement is working efficiently and should continue."
Bob Dudley, CEO of BP, remarked, "I couldn't agree with [Pouyanne] more … I think this is the world we are living in; short term exuberance does not characterize I think any of the CEOs that I know in oil and gas right now."
Claudio Descalzi, chief executive of ENI, said, "I think that OPEC need to keep this position … It's not just to balance demand but also to give an assurance to all the investors."
Another latecomer to the pro-OPEC bandwagon as the days draw nearer for the cartel's November annual general meeting in Vienna was Phil Streible, senior market strategist at RJO Futures, who told Bloomberg that in addition to the OPEC cutbacks extension being ratified, "Russia will most likely continue to cut as well."
He added that if crude dropped below $50, then OPEC "would most likely not" extend their agreement, but he doubted that price scenario would come to pass.
Friday also saw a positive resolution to a situation many analysts had assumed would erupt and add tension to an already jittery investment climate: namely, Venezuela's state owned PDVSA made a crucial $841 million bond payment and retained control of what CNBC described as "its crown jewel," CITGO.
The Bolivian republic is hardly out of the woods yet: it still owes another $1.2 billion in principal and interest on another bond, due November 2.
But for the time being the news brings an unspoiled end to a week that has seen impressive market gains based largely on sentiment and hope that OPEC staying the course in a slightly less volatile world market will result in true market rebalance (despite several years' worth of analytical arguments that the cartel's efforts are fundamentally flawed and will do little if anything to reduce rampant overproduction).
Earlier this week, OPEC even received praise of a rumoured exit strategy it is preparing in conjunction with its plans to extend its cuts; Ben Sharples, reporter for Bloomberg, said this proved that the cartel "is thinking about life after the cuts and how not to shock the market."
